Tanker charters: Owners to seek change in fleet age limit

Indian ship owners will lobby the Indian Oil Corporation and Bharat Petroleum Corporation seeking relaxation in the 10-year age limit stipulated by the State-run oil refiners on hiring oil super tankers and suezmax carriers for as much as five years, in the first such long-term contract to support local carriers.

Of the 42 crude-oil tankers flying the Indian flag, 20 are suezmaxes and six are very large crude carriers (VLCCs). The Shipping Corporation of India (SCI) has four VLCCs, while Essar Shipping and Seven Islands Shipping have one each. But only one VLCC — the 2009-built ‘Desh Vishal’ owned by SCI — can bid for the tender issued by IOC. In the suezmax category, only two such ships owned by Great Eastern Shipping Co are under 10 years and eligible to bid for the BPC deal.

The State-run oil refiners have set a 10-year age limit for qualifying ships because by the time the five-year contract ends, the ships will be 15-years old, reaching the threshold prescribed by most of the crude-oil loading terminals worldwide, particularly for VLCCs.

To be sure, IOC and BPC allow fleet owners who don’t have the requisite ships while submitting offers, to participate in the tenders by showing relevant proof of acquisition of such ships, which should be converted into Indian flag within six months of winning the contract.

With most of the VLCCs and suezmaxes under the Indian flag older than 10 years, fleet owners say they should be allowed to offer their 12-13-year-old ships, and on winning the contract, operate the ship for 2-3 years.

“We are trying to see if we can get 10-year-old ships that can fit into the tender. But meanwhile, we would like to pursue with the refiners if the 12-13 year-old ships can operate; we can substitute with a younger ship after a year or so,” said an executive with one of the shipping companies.

“We will give them a substitute option. They can be a little flexible on this front to support the Indian shipping industry. This will allow Indian owners to buy time to get a substitute vessel because buying a ship is not a super market purchase. It will take a year or two — first to identify the ship, then arrange funds and convert it into Indian flag,” said another industry executive.

But this demand goes against the stated objective of inducting modern, younger vessels into the Indian fleet on the back of long-term cargo support from State-run firms, says a shipping industry consultant. Around 40 per cent of vessels on the global fleet are less than four years old, while in the Indian fleet, around 40 per cent of vessels are more than 20 years old.

The share of Indian ships belonging to the 0-10 years range increased to 37 per cent in 2016 from about 29 per cent in 2011. With significant scrapping across dry bulk and tanker segments, the age profile across vessel categories has improved, said the industry consultant.